Subscription billing model has been used for hundreds of years, dating back to the 17th century, while it flourished gradually throughout the 20th century as more businesses started getting inclined towards it from various sectors – from education to food. With businesses being increasingly digitized, subscription billing has become a common term when it comes to billing. Most of the online businesses are adopting subscription based business models making subscription billing systems even more popular.
In this blog we will talk about what is subscription billing, its advantages, what is subscription billing system and discuss all the important factors you need to know. So, let’s get started!
What is Subscription Billing? Definition, Advantages and More
Subscription billing is a payment method used by most of the online businesses, especially the subscription based ones, where the customers get invoiced automatically at given intervals of time such as monthly, quarterly, annually, bi-annually etc.
Subscription billing has picked up pace and popularity among various businesses from different domains such as e-commerce or retail stores, OTT platforms, gaming apps, e-learning platforms, job portals, online grocery stores and whatnot!
Some of the prominent examples of businesses that use subscription billing methods are, Amazon, Netflix,, Salesforce, Xbox, Apple Music, FlyLine, LinkedIn, Dollar Shave Club etc. And this is just the start, in the push for digitization, the subscription billing model will see further adoption across various other industries as well. Now there are several factors that have contributed to this exponential growth.
Advantages of Subscription Billing System
Here are some of the top advantages of a subscription billing system –
It is not new that many businesses find it difficult to process and accept timely payments due to various reasons such as missed or delayed payments, subscriber churn, and other factors. Furthermore, there are other issues too that may arise, like changes of subscription plan, mid-cycle change in the products or services taken etc. These all are handled by a subscription billing system flawlessly. For instance, if a customer forgets or misses any payment, then such a billing system can extend one or two more days to renew the subscription plan or pause the access until the payment is cleared. As a result, such delayed payment will not affect the payment flow of your business.
More Options for Customers
With the help of a subscription billing software you can offer multiple options to the customers in terms of payment and content that works in favor of your business. For example, you can offer different plans such as silver, gold, diamond etc. with ascending value in terms of price and content. So that the customers can choose the ones as per their preferences, upgrade or downgrade as and when they want. This also lowers the chance of subscription churn due to the reasons like higher price, additional unwanted content etc., as they can simply choose another plan instead of stopping to take your service! You can also offer bundle services or customized subscription plans based on the customer demand like many OTT platforms and other businesses do.
Having a subscription billing system for your business implies you will have more liberty to easily set up multiple monetization plans, promotional offers, and more options for language, currency, payment method etc. that are easily implementable on your platform. No doubt that it will give your business competitive advantages over the others in the market.
More Control to Customers
Gone are the days when customers used to be only at the receiving end of all the billing related activities- adjusting billing frequency to managing the subscription plans. A top-rated subscription billing system lets the customers have more control over their billing activities- be it upgrading or downgrading subscription plans or choosing a new currency or language for generating invoices. Most of the subscription billing systems offer self-service portals to the customers that often act as another factor drawing the customers who prefer to have more control at their end.
So, now that we have a clearer idea on why the subscription billing system is a must-have for online businesses, let’s delve deeper into the subscription billing models that are the most sought-after across diverse industries.
Which Subscription Billing Models are the Most Popular Ones?
Now, let’s have a glimpse at the most popular subscription billing models that are used by the majority of the businesses-
B2C subscription billing models are highly used in B2C subscription businesses. In such pricing models, customers start taking the subscription of products or services and they keep getting charged at regular intervals until they stop taking the subscription. Most of such B2C subscription billing models are of two types-
Flat Rate Subscription Billing
In flat rate subscription billing models, customers get charged a specific fixed amount for the fixed set of products, services, or features. Flat rate subscription models have garnered wide popularity as they are easily manageable by the businesses when it comes to adding more products, features or services in the subscription plans and charging accordingly.
Tiered Subscription Billing
Such subscription billing models are highly effective when customers opt for multiple products, services or offerings. Tiered subscription billing models enable the businesses to offer different packages or combinations of products, features and services based on the different user levels. Here, with the increase in price, customers can get access to more features, services or better offerings.
Also Read: How to Make Data Driven Pricing Decisions for Your Business?
Starting from marketing tools to cloud computing platforms- B2B subscription billing models are getting widely accepted in the B2B industry.
Such billing models are basically of two types-
Per User B2B Subscription Billing
Such B2B subscription billing models are highly sought-after in the B2B industry, due to its ease of usage. Such billing models allow companies to pay depending on the number of employees they want to have access to the products, platforms or features.
Tiered B2B Subscription Billing
Tired B2B subscription models offer various subscription plans the price of which rises with the number of features, products or services or the qualities of the same.
For instance, Salesforce offers tiered pricing for its service cloud plan where the monthly price for Essentials, Professional, Enterprise, and Unlimited are US $25, US $75, US $150, and US $300 respectively.
Freemium Subscription Billing
Freemium subscription billing model is simple to implement and useful in conveying the brand value to the customers. By taking freemium subscription, customers can avail a limited set of products, features or services. And if they want to get access to more, they need to upgrade by purchasing a subscription plan.
For instance, Mailchimp offers a freemium plan where customers get limited access to marketing CRM, creative assistant, website builder etc. And they need to upgrade to other plans like Essentials, Standard, or Premium to unleash more benefits.
Overage Subscription Billing
Overage subscription billing models allow the customers to access limited features or offerings at a base price or free. And if they want to get access to more, extra charges are incurred.
The subscription billing is a vast topic to be discussed, explored and applied in diverse industries. Owing to its unlimited benefits, broad range of billing models offered, and flexibility, every other business is adopting subscription billing models. And in order to stand out of the crowd, you must choose the one that is not only efficient in terms of all the above-mentioned functionalities and billing models but easily integrable, lets you customize its different feature-rich solutions and most importantly, supports globalization and scaling up of your business in a hassle-free way.
Muvi Billing, the enterprise-grade subscription billing software for websites and apps, offers 40+ payment gateways, smart record keeping, flexible & automated billing solution, differential taxes, multiple monetization models, add-ons and many more!
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